ExampleTwo technologies compete for energy consumers. They both produce energy at the same cost. However, one produces far more pollution than the other. In an efficient economic model, a market would exist to cap pollution to a country's quality of life targets. The technology that produces more pollution would need to purchase the right to do so. This results in more sales for the clean technology. In other words, economic decisions become more rational and efficient. When the market for pollution is missing, the technology that pollutes more may become dominant even where the clean technology is cost competitive.
|Overview: Missing Market|
When a commodity lacks a market resulting in economic inefficiencies.
Economic models that lack markets to price negative impacts to quality of life are inefficient.